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IN THE HIGH COURT OF ALLAHABAD
M. C. Desai and N. U. Beg, JJ.
GHARABHARAN - Appellant
Versus
RADHA KISHAN - Respondents
First Appeal 499 Of 1952
Decided On : 09/25/1957
PARTNERSHIP - LOAN - ACCOUNT STATED - LIMITATION - ARTICLE 64 OF THE LIMITATION ACT - SECTION 25 (3) OF THE CONTRACT ACT - INTERPRETATION AND APPLICATION.
Fact of the Case:
Plaintiff filed a suit for recovery of money advanced as a loan to the partnership firm of which defendants 2 and 3 were partners. Defendant 2 admitted the execution of the sarkhat and receipt of the money, but claimed it was an investment by defendant 3 to save income tax. Defendant 3 denied the authority of defendant 2 to contract loans on behalf of the firm and claimed the firm was dissolved and he had paid off his liability.
Finding of the Court:
The court found that the money in suit was a loan advanced by the plaintiff to the firm, that defendant 2 had authority to contract loans on behalf of the firm, and that the suit was not barred by limitation. The court held that the sarkhat was a genuine "account stated" and that the suit was within time under Article 64 of the Limitation Act.
Issues: 1. Whether the money in suit was a loan or an investment? 2. Whether the suit was barred by limitation?
Ratio Decidendi: 1. The court held that the money in suit was a loan based on the evidence, including the admissions of the defendants and the entries in the sarkhat. 2. The court held that the suit was not barred by limitation because: - Article 64 of the Limitation Act applied to the case as the cause of action accrued on the date of the "account stated" (sarkhat). - The sarkhat was a genuine "account stated" as it represented a true picture of the accounts between the parties and was signed by defendant 2 on behalf of the firm. - Section 25 (3) of the Contract Act also applied as the sarkhat contained a promise to pay the agreed balance and was signed by defendant 2, who had the authority to act on behalf of the firm.
Final Decision: The court dismissed the appeals filed by defendants 2 and 3, upholding the trial court's decree in favor of the plaintiff.
( 1 ) THESE are two connected appeals (F. A. No. 499 of 1952 and F. A. No. 40 of 1953) arising out of a suit for recovery of money. The suit was filed by one Radha Krishna. Defendant No. 1 in the suit was firm Suraj Mal Ganesh Das. Defendants Nos. 2 and 3 in the suit were Gharbharan prasad and Seth Genesh Das, partners of the Firm Suraj Mal Ganesh Das Defendant No. 1.
( 2 ) THE case of the plaintiff was that defendant No. 2 Gharbharan Prasad was the Managing partner of the firm styled as Firm Suraj Mal Ganesh Das, and in the course of the management of the said Firm, he borrowed monies from the plaintiff at various times for the purposes of the firm. He had taken a loan of Rs. 10,000/- on the 17th July, 1945, of Rs. 3,000/- on the 7th august, 1945, of Rs. 2000/- on the 13th August, 1945 and of Rs. 5,000/- on the 26th of september, 1945. Thus the plaintiff had advanced a total amount of Rs. 20,000/- as loan to the Firm of which defendants Nos. 2 and 3 were the partners. Defendants Nos. 2 and 3 were liable for the payment of the said amount of Rs. 20,000/- being partners of the Firm. It was further alleged that between the 5th of August, 1946, and the 9th September, 1948, defendants had paid Rs. 3,697/2/5 towards interest in various instalments. On the 9th September, 1948, an accounting was done between the parties and after defendant No. 2 had paid the interest due upto that date, a balance was struck and an amount arrived at as "account stated. " an entry to that effect was made in the sarkhat Ext. 4. Below the entry, defendant No. 2 affixed his signature thereby acknowledging the liability and renewing the contract to pay. The defendants having failed to pay the amount, the present suit was filed by the plaintiff on the 1st of May, 1951, praying that a decree for Rs. 20,000/- as principal and Rs. 3,150/- as interest, in all a total sum of Rs. 23,150/- be passed against the defendants. A further prayer was also made for the award of the pendente lite and future interest and costs of the suit.
( 3 ) BOTH defendants Nos. 2 and 3 admitted that they were the partners of the firm Suraj Mal ganesh Das. It is interesting to note that each of the two defendants. e. , defendants Nos. 2 and 3, accused the other of colluding with the plaintiff. They contested the suit on various grounds.
( 4 ) DEFENDANT No. 2 admitted the execution of the sarkhat. He also admitted the receipt of the amount of money, but he took the plea that the amounts evidenced by the sarkhat were not given by way of loan, but they constituted an investment by way of capital by defendant No. 3 in the firm Suraj Mal Ganesh Das. This was done for the purpose of saving income-tax. He also pleaded that the firm Suraj Mal Ganesh Das had been dissolved on the 8th of December, 1948, and after accounting between the partners, the entire liability of the firm was taken over by defendant No. 3. He also pleaded the bar of limitation.
( 5 ) DEFENDANT No. 3 pleaded that defendant No. 2 had no authority to contract any loan on behalf of the firm Suraj Mal Ganesh Das, and that, therefore, neither he nor the firm Suraj Mal Ganesh das could be made liable for the payment of any such amount. He also alleged that the firm suraj Mal Ganesh Das had been dissolved after the final accounting between the parties, and, after the said accounting, he had paid off his liability in cash. He could not, therefore, be made liable. He also pleaded that the suit was barred by time.
( 6 ) THE trial court found that the amount in suit was advanced by way of loan by the plaintiff to the firm Suraj Mal Ganesh Das, that defendant No. 2 had authority to contract loans on behalf of the firm and that the suit was not barred by limitation. The trial court, accordingly, decreed the suit in toto.
( 7 ) DISSATISFIED with the said judgment, the two first appeals have been filed in the High Court. First Appeal No. 499 of 1952 has been filed by defendant No. 2 and First Appeal No. 40 of 1953 has been fi
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